Because married couples often share debts, one obvious question is how they can use the bankruptcy process to their advantage. Here are several ways married partners can do so.
(1) Because married partners aren’t obligated to file jointly when one of them encounters difficulties paying debts, they have some flexibility in how to deal with financial problems. For example, if one spouse has significant credit card debt, it can be worthwhile for that partner to file an individual bankruptcy. The non-filing spouse’s assets won’t be liquidated in chapter 7.
(2) Although non-filing spouses’ incomes are taken into account in every bankruptcy chapter, a debtor can use the non-filing spouse’s expenditures to pass the means test in chapter 7.
(3) Filing individually is easier for New Yorkers who have joint debts because New York isn’t a marital property state. This means that if one spouse files bankruptcy the non-filer’s credit rating won’t be affected.
(4) If one spouse discharges a joint debt, the other spouse is still responsible for paying it. One advantage of doing this is that the non-filing spouse might still be able to file bankruptcy in the future. The filing spouse won’t be able to discharge a debt for eight years, but this doesn’t limit the non-filing spouse’s options.
(5) Individual filings can also be advantageous in chapter 13 cases. One spouse can stay out of the case unless the filing spouse has trouble making the payments. Then he or she can join and rescue a plan that’s having problems.
(6) One of the other big advantages of individual filings is that. in chapter 13, the non-filing spouse will benefit from the automatic stay. This means creditors won’t be able to make collection calls or send letters to the spouse’s residence, even if they’re not living together. Both partners benefit from peace of mind.
In many situations it’s wise for only one partner to file bankruptcy while the other does not join the filing. However, an experienced New York bankruptcy lawyer will help you evaluate your situation and advise you and your spouse on the best course of action.
For answers to more questions about married couples in bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney in Brooklyn Bruce Weiner for a free initial consultation.